10 Mar 2016

Quarter of dairy farmers vulnerable - consultant

9:21 am on 10 March 2016

A quarter of New Zealand dairy farmers could be vulnerable to going under, according to an agricultural consultant.

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Photo: 123rf.com

Many farmers could be struggling after Fonterra cut its forecast milk payout for the second time this year, to $3.90 - well below the break-even figure.

Peter Fraser, who has worked for some of New Zealand's biggest dairy companies, told Morning Report that in the past 10 - 15 years there had been a build up in intensive dairy production and extensive dairy growth, and some farmers were very exposed.

"They've got high cost structures, and in many cases quite 'sticky' cost structures."

"Horrible thought - but if we picked up a paper in 12 months time and it said 25 percent of dairy farmers - and I'm including sharemilkers in there as well - had left the industry - that would not surprise me."

Mr Fraser said many dairy farmers had low equity because they had used debt to finance their farms when they entered the industry.

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